Declined Card Blues? Here’s How to Weather the Chip Card Storm

by Kathy Greenler Sexton 0

This week, Netflix partially blamed the new Eurocard, MasterCard, Visa (EMV) “chip cards” for its failure to reach targets for subscriber growth in the U.S. A number of the company’s customers got new credit card numbers when they received their new chip cards and didn’t provide the new numbers to Netflix. The result? An increase in customer account cancellations, also known as involuntary churn, when Netflix was unable to charge the cards during its automatic renewal process.

This is just one example of the impact EMV will have on all businesses that rely on recurring “Card Not Present” transactions. According to our research, the number of new payment card numbers being reissued increased by 45 percent from April 2015 to June 2015. Some banks have not yet issued their new chip cards. The storm of declined cards will not end soon and some businesses will lose customers permanently.

The good news for merchants like Netflix? There are tools and processes that can help mitigate the potential hit to profits.

Get Accounts Updated Automatically
One way to minimize involuntary churn is by using Account Updater — a service offered by Visa, MasterCard, Discover, and more recently, American Express. It provides updated payment card information to help merchants manage declined payment cards.
Account Updater originated in 2003 by payment card-issuing banks as a courtesy to consumers. The idea was to help people keep their subscriptions intact, despite reissued cards. In 2009, Account Updater was redesigned for merchants. It provides automatic card updates for participating merchant payment processing systems.

How Account Updater Works
Merchants enrolled in Account Updater programs with Visa and MasterCard submit account numbers of customers with whom they have ongoing payment relationships. The payment card issuer then processes inquiries against its database and returns a few possible responses to the merchant (including updated account numbers, expiration dates, etc.). Merchants may apply any changes to the card information they have on file. From that point, they can use the updated information for future authorizations. The ROI of the Account Updater service is magnified by the attractive pricing associated with it, which is normally based on the number of updates provided.

Payment Gateway

Need a Payment Processing or Payment Gateway Vendor?
Both large and small merchants with recurring transactions can access Account Updater if they use a merchant acquirer (processor) that is integrated with Account Updater. Merchants that do not have a direct integration with an acquirer will have to rely on a gateway partner to engage this service on their behalf. In such cases, merchants are dependent upon their gateways to support the Account Updater service to work in tandem with their merchant acquirer. Some gateways support Account Updater services, while many do not.

Account Updater can also be engaged via a billing management platform. If your company uses a billing platform or subscription management platform with billing capabilities, you will need to make sure that the merchant acquirer or processor that connects to that platform supports the Account Updater service.

When selecting merchant partners, it’s best to evaluate ones that have experience in your industry and with your business model. You’ll also want to find a partner that suits your budget and meets your other business needs.